The largest prediction market, Kalshi, has been sued by New York state for allegedly running illegal gambling operations in the state. The state is demanding at least $36 billion in damages over alleged illegal gambling.
The lawsuit comes days after Kalshi failed to block the state’s gambling rules, putting its federal regulatory defense under fresh pressure.
New York Seeks Billions From Kalshi
On July 31, New York Attorney General Letitia James filed the lawsuit in New York County Supreme Court, accusing Kalshi of offering sports, election, and culture-related event contracts without a state gambling license.
The state is also seeking a temporary restraining order to stop Kalshi from offering these contracts in New York.
The proposed order would also require Kalshi to provide full restitution to customers, give up money earned through the alleged violations, and pay additional civil penalties.
New York is seeking three times the amount Kalshi allegedly gained, along with a $100,000 penalty for each prohibited transaction. The state said the total could reach at least $36 billion after a full accounting.
Why New York Says Kalshi Is Running Illegal Gambling
New York argues they are gambling because users can put money on the outcome of sports and other events. The state also claims Kalshi does not hold the gaming license required to offer mobile sports betting in New York.
Another concern is age. New York’s mobile sports betting rules set the minimum age at 21, while the state alleges that Kalshi allows users aged 18 to 20 to participate.
The state says this creates consumer-protection and problem-gambling risks that should not be bypassed through federal registration.
Kalshi’s Federal Shield Faces More Pressure
The lawsuit comes only days after Kalshi suffered another setback in its attempt to block New York’s gambling laws. A federal court previously rejected Kalshi’s request for a preliminary injunction, finding that federal commodities law did not automatically override New York’s gambling rules.
That ruling has become an important part of the wider fight between prediction markets and state regulators.
The CFTC, meanwhile, has argued that federally regulated event contracts fall under its authority. The agency has also taken legal action against states seeking to restrict prediction markets.
Wisconsin has also challenged platforms including Kalshi and Polymarket, while other states have taken steps to restrict sports event contracts.
For Kalshi, the latest lawsuit puts both its business model and its federal regulatory argument under greater pressure.
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